The Wall Street Journal reports on the latest middle finger from the credit card industry:

Just two months after one of the most controversial parts of the Dodd-Frank financial-overhaul law was enacted, some merchants and consumers are starting to pay the price. Many business owners who sell low-priced goods like coffee and candy bars now are paying higher rates—not lower—when their customers use debit cards for transactions that are less than roughly $10.

That is because credit-card companies used to give merchants discounts on debit-card fees they pay on small transactions. But the Dodd-Frank Act placed an overall cap on the fees, and the banking industry has responded by eliminating the discounts.

"There will be some unhappy parties, as there always is when the government gets in the way of the free-market system," says Chris McWilton, president of U.S. markets for MasterCard Inc.

The sheer gall on display here is just mind-boggling. If card companies were really interested in a free market, they'd remove the clause in their standard contract that prevents merchants from charging higher prices on credit and debit card transactions. Merchants would then be free to pass along swipe fees to their customers or not as they saw fit, and the free market would determine the outcome. But they've resolutely refused to do that, and since Visa and MasterCard are an effective monopoly, merchants have nowhere else to go.

Over the past decade, Visa and MasterCard have spent billions of their marketing dollars on commercials like the one on the right, trying to persuade people that only a real self-centered bastard would so much as think of using cash for a small purchase these days. This worked largely because merchants didn't fight back. But now that the marketing campaign has successfully trained consumers to whip out their cards for anything more expensive than a candy bar, and it's too late for merchants to do anything about it, the fees go up.

Don't blame Dodd-Frank for this. Blame the card companies. They've done everything they can to prevent a free market in plastic, and this is the result.

Via Reihan Salam, here's an interesting, if limited bit of raw data. For each of the richest countries in the world it shows cash benefits (top white bar) and taxes (bottom dark blue bar) for the bottom 20% of the working-age population. Both are scaled to income. In the United States, for example, cash benefits on average amount to about 35% of market income, while taxes amount to about 11% of income. The red triangles show the net amount of cash transfer. In the United States, it averages about 24% of market income.

This doesn't include non-cash benefits such as health insurance, so it doesn't tell the whole story. But what the study does tell us is that over the past 30 years (a) income inequality has been rising nearly everywhere, while (b) cash benefits to the non-elderly have been declining almost everywhere. In the United States, those benefits amount to roughly 2% of GDP. That's pretty stingy. The full study is here.

The FDA's scientists have (once again) concluded that Plan B, the "morning after" pill, is safe for unrestricted sale over the counter. Unfortunately, the Obama administration has apparently decided that it would be politically unwise to allow this with an election coming up:

“I agree ... there is adequate and reasonable, well-supported, and science-based evidence that Plan B One-Step is safe and effective and should be approved for nonprescription use for all females of child-bearing potential,” [FDA Administrator Margaret Hamburg ] said.

“However, this morning I received a memorandum from the Secretary of Health and Human Services invoking her authority under the Federal Food, Drug, and Cosmetic Act to execute its provisions and stating that she does not agree with the Agency’s decision to allow the marketing of Plan B One-Step nonprescription for all females of child-bearing potential,” she said.

This is the first time an HHS secretary has ever overruled the FDA, and it's a blow to those of us who believe that Democratic administrations are more willing to be guided by scientific evidence than Republican ones. I guess somebody somewhere decided that independent voters might not approve of this, so now it's back to the salt mines.

I confess that I've never quite gotten all the enthusiasm over the Khan Academy. For those of you who have never heard of it, it's the brainchild of Salman Khan, an MIT graduate who started tutoring a cousin in math over the internet a few years ago. He eventually started recording the sessions and turned them into a vast library of short videos explaining various concepts in math and science. Later he branched out into other subjects, some done by other lecturers, and now has a collection of over 2,700 instructional videos at

I've dipped into the videos from time to time, and truthfully, they've always seemed perfectly competent but not really all that special. On the other hand, they do cover a lot of ground; Khan has a nice, engaging speaking style; and students can watch videos over and over if they're having trouble. But it turns out there's more to it. Via Tyler Cowen, here's a piece in Inside Higher Ed about what the Khan Academy does behind the scenes:

“I think too much conversation about Khan Academy is about cute little videos," Khan said in an interview last week. “Most of our resources, almost two-thirds of [the staff], are engineers working on the exercises and analytics platform. That, I think, is what we’re most excited about.”

....Using math and computer science concepts decidedly more advanced than most of those in Khan’s video library, the Khan engineers have trained the website’s exercise platform how to predict, with startling accuracy, how likely it is that a student will correctly answer the next practice problem — and whether that student will be able to solve the same type of problem a week, two weeks, and a month later.

They do this by accounting for hundreds of data points that describe, in numbers, the entire history of the relationship between a learner and a concept. “If [a user is] logged in, then we have the entire history of every problem they’ve done, and how long it took them, and how they did,” says Ben Kamens, the lead developer at Khan Academy. “So whenever anybody does a problem, we see whether they got it right or wrong, how many tries it took them, what their guess was, what the problem was, how many hints they used, and how long they took between each hint.”

The Khan engineers are also working to tweak the exercise platform so it does not confuse genuine mastery with “pattern matching” — a method of problem-solving wherein a student mechanically rehashes the steps necessary to solve that type of problem without necessarily grasping, conceptually, what those steps represent.

Interesting! Maybe all those out-of-work Wall Street rocket scientists are finally using their skills for something socially useful. There's more at the link.

Matt Yglesias is annoyed at President Obama for repeatedly saying that the rise of ATM machines has reduced the number of bank tellers. In fact, the number of bank tellers and the number of ATMs has gone up over the past decade. In 1999 American banks employed 1.62 tellers per 1000 people, and by the peak pre-recession year of 2007 that had gone up to 2.02 per 1000.

So Obama is wrong about this. But what I'm really curious about is something else: What are all these tellers doing? It's easy for me to believe that ATMs didn't reduce our need for tellers, but instead simply increased the number of banking transactions we engage in. Instead of carefully figuring out how much money we need every week or two, we just go to the ATM whenever we run low. So instead of two or three withdrawals a month, we all now pull money out of the bank two or three times a week. The effect on tellers might be pretty small.

But even if that's true (and I'm just guessing), why do we need more tellers? What are they all doing? My local bank is just a single data point, but one possibility is: nothing. Thirty years ago, when I went to the bank to do something, I had to wait in line. Not anymore! My Wells Fargo branch always has three or four tellers available, and the modal number of people waiting in line is zero. Most of the time, you just walk up to a teller and do your business.

This is great for me, of course, but frankly doesn't seem like a profit-maximizing strategy for Wells Fargo. Do I have any bank manager readers who can provide some insight into this? Is my branch unusual? Are tellers busy with other work when they aren't helping customers? Has the average teller transaction gotten more complex over the past decade? What's the story here?

One of the criticisms of Obamacare is that it gives employers a big incentive to drop healthcare coverage. Sure, they'd have to pay a fine, but they'd still save a bundle of money and it's not like they'd have to worry about their workers going completely without insurance. Employees would just go onto the exchanges and buy subsidized plans there. Sarah Kliff met with Lockton, a Kansas City-based company that consults with mid-sized companies on health insurance benefits, to put some numbers to this:

For the employer, dropping coverage is a pretty decent deal: A company would see its health care costs reduced by over 40 percent. They don’t drop to zero, however, since the employer would still be on the hook for the fines that come along with not offering coverage.

But for the employee, it’s a pretty lousy deal. Lockton ran the numbers, using data on how much employers pay for health insurance now and how much health insurance on the exchanges is projected to cost.They found that employers foot a significantly larger chunk of the insurance bill than the federal government would, even with the new subsidies they’d receive. The firm predicts their premiums would increase anywhere from 79 to 125 percent if they lose employer coverage and have to go to the exchange. There’s such a big variation because exchange subsidies vary by income: Those who earn more are eligible for a larger subsidy.

Here's my question about this — and it's a genuine question since I don't understand the dynamics here too well. It's fairly common in big companies for executives to have a better healthcare plan than rank-and-file employees. But that's usually limited to just the very top execs. At the level of director and below, everyone is on the same plan, and that's because health insurance providers aren't willing to let companies pick and choose who's on the group plan. It's all or nothing. So one of the things that will prevent companies from dropping coverage is that they'd have to drop it for everyone, and that would cause so much uproar in the managerial ranks that they couldn't get away with it.

There are a couple of reasons why this might not be a big deal:

  • Health insurers, in fact, might be happy to provide policies that cover supervisory personnel and no one else.
  • Or maybe they wouldn't, but it wouldn't be that big a deal. Companies would shunt everyone onto the exchanges, but give managers an annual bonus of some kind that would cover (say) 85% of the cost of a gold level plan. Everyone else would have to make do with whatever they could afford through the exchange.

So much of this depends on behavioral predictions that I imagine that there's really no way to know for sure how it's going to play out. But if employers do decide to start dropping health coverage en masse, what will that mean? Is it genuinely a bad thing? Or would it be a good deal in the long run, increasing pressure on Congress to hasten the day when we have genuine universal coverage in America? It's a good question.

Senator Mark Kirk explains his opposition to extending the payroll tax cut that was originally passed last year:

The White House has redefined this as the payroll tax deduction. It's not the payroll tax deduction — it's contributions to Social Security. And when the American people hear that we have legislation moving forward to cut contributions to Social Security and drive the trust fund into the red, I think opposition would be fairly overwhelming.

Everybody gets to put their own spin on things, and this has become a common Republican meme over the past week or two. Unfortunately, it's just factually false. Normally, a reduction in the payroll tax would indeed reduce contributions to the Social Security trust fund, but last year's bill specifically made up for this loss from the general fund. The trust fund got every penny it normally would have, and all the proposals on the table this year do the same.

What changes here isn't the solvency of the trust fund. What changes is where the money comes from. Payroll taxes mainly come from the middle and working classes. The general fund is supported by income taxes, which mainly come from the well-off and the rich. So, generally speaking, a payroll tax cut that's compensated for by transfers from the general fund reduces the taxes of the middle and working classes and raises the taxes of the well-off and the rich.

If Republicans object to this — and they do — they should say so. But it's long past time to stop pretending that this has anything to do with the trust fund, and long past time for the media to stop passing along this claim unchallenged.

Doctors in America

Aaron Carroll thinks that retail health clinics fill a useful niche. "There are times when you need to see a health care professional early in the morning, or later at night," he says. "Have you tried to get an appointment lately when you’re sick? It’s hard!" The chart on the right, which has made an appearance before on this blog, tells the story. Upwards of 20% of people who are sick have to wait a week to get an appointment to see a doctor. Matt Yglesias comments:

A lot of health care professionals in the United States seem to me to be slightly in denial about the level of service they're providing. Somehow we have the most expensive health care system in the world, with the highest paid doctors, and yet it's strangely difficult to actually get an appointment to see one.

My guess is that they're not in denial at all. The reason it takes a long time to see a doctor is because they're booked solid with appointments. They see 20 or 30 patients a day, every day, so most of them really have no particular incentive to make it any easier to make an appointment. Why would they when they're already working at capacity?

And why are they working at capacity? Part of the reason is that we just don't have all that many doctors in America:

These two charts are surprisingly uncorrelated, which presumably has something to do with how healthcare is run in various countries and something to do with cultural mores about how often we like to see doctors. Still, the overall picture is clear: we have relatively few doctors, they're all really busy, and they get paid a lot more than in other countries. That may not be so hot from a patient's point of view, but from a doctor's standpoint, what's not to like?

Liberals and Fraud

The Obama administration has announced plans to crack down on food stamp fraud among both retailers and users. Atrios comments:

Cracking down on thieving retailers is of course a good idea, but, really? Going after SNAP beneficiaries who try to convert their meager benefits to an even more meager amount of cash? I imagine some people who do this are using the money for Things We Officially Frown Upon, but some are probably trying to pay their damn bills.

My guess is that this crackdown is hardly a huge program, so it's not as if loads of resources are being diverted to make life more difficult for the poor. Beyond that, though, Obama seems to instinctively get something that the rest of us lefties probably ought to appreciate more: like it or not, if you want the public to support government programs, you need to make sure they're administered effectively. That's doubly or triply true of social welfare programs, which are easily demagogued even in the best of times. If anything, liberals who support these programs ought to be more concerned about rooting out fraud and improving efficiency than conservatives, who'd be just as happy to see them simply go away.

This is fundamentally a Charlie Peters-ish neoliberal insight, and neoliberalism has obviously taken a lot of lumps over the past decade. Some of them were deserved, some weren't. Either way, this particular insight is one worth holding onto.

When Darrell Issa took over the Oversight and Government Reform Committee, everyone expected a tsunami of scandal investigations. But it hasn't really happened. Why? Jonathan Bernstein says it might be because Obama just runs a really clean shop, but he doesn't find that convincing. Or maybe Issa is just incompetent. But that's not very convincing either. That leaves this:

Totally, totally, speculative, but here goes. Perhaps the reason that the House isn't manufacturing scandals is because the changed media environment has changed the incentives. In the old days, opposite-party Congresses had to work hard to manufacture scandals good enough to get the neutral press to notice. Now, why bother? Most partisans, and especially the primary voters that Members of Congress are increasingly most worried about, get most of their news from the partisan press, and they don't need any Congressional stamp of authority to consider something a legitimate scandal worthy of devoting hours of programming to.

Maybe! But there's another possible explanation: maybe Dave Weigel was right all along. It's true that Issa promised lots and lots of investigations ("I want seven hearings a week, times 40 weeks"), but there was also this:

“As Clint Eastwood says, a man needs to know his limitations,” Issa said....While he promises an ambitious — and some say confrontational — agenda, Issa is making overtures to the Obama administration: He already has a meeting scheduled with Vice President Joe Biden to discuss stimulus oversight.

....Issa is also pointedly looking to avoid probing what he seems to view as peripheral issues — like Waxman and former Chairman Tom Davis’s foray into hearings on steroids in baseball. “This is important, in contrast to hearings on steroids in baseball, where I felt that it was inherently wrong to get Roger Clemens to lie to Congress,” Issa said. “The American people really want us to shrink government.”

Issa also wants to avoid the sometimes petty controversies that enmeshed Rep. Dan Burton (R-Ind.) as committee chairman during the Clinton presidency and sometimes made him the issue.

It pains me to say anything nice about Issa, the man who bequeathed us Arnold Schwarzenegger, but maybe he takes this stuff more seriously than his critics ever gave him credit for. Obviously he's going to focus his attention on conservative causes and he's going to focus his oversight on the Obama administration — both perfectly reasonable things to do — but perhaps he was sincere about avoiding petty nonsense. Stranger things have happened.